Transformers & Rectifiers Ltd v Needs Ltd

JurisdictionEngland & Wales
JudgeMr Justice Edwards-Stuart,Mr. Justice Edwards-Stuart:
Judgment Date13 February 2015
Neutral Citation[2015] EWHC 269 (TCC)
Docket NumberCase No: HT-2014000036
CourtQueen's Bench Division (Technology and Construction Court)
Date13 February 2015
Between:
Transformers & Rectifiers Ltd
Claimant
and
Needs Ltd
Defendant

[2015] EWHC 269 (TCC)

Before:

Mr. Justice Edwards-Stuart

Case No: HT-2014000036

(formerly HT-1428)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Rolls Building, 7 Rolls Buildings

London EC4A 1NL

Justin Mort Esq, QC (instructed by GBH Law Ltd) for the Claimant

Ian Ridd Esq (instructed by Nockolds Solicitors Ltd) for the Defendant

Hearing dates: 11 th December 2014

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Mr Justice Edwards-Stuart Mr. Justice Edwards-Stuart:

Introduction

1

This judgment follows the trial of a preliminary issue to determine the terms of the contracts made between the parties during a long course of dealing but, in particular, the terms of two contracts for the purchase of nitrile gaskets that were entered into by the Claimant in March 2012 and February 2013. It is alleged that the gaskets supplied by the Defendant were unsuitable for their purpose and not in accordance with the contract.

2

The Claimant says that its terms and conditions applied because they were printed on the back of the purchase orders, although there was no reference to those terms and conditions on the face of the purchase orders. The Defendant submits that its terms and conditions applied because they were referred to on its acknowledgements of order. Its case is that any liability for breach of contract on its part is limited or excluded by those terms and conditions. This has given rise to a "battle of the forms".

3

Following the conclusion of the argument I considered the matter overnight and reached a clear opinion as to the answer. It was that neither side's terms and conditions applied. Since it was important to the parties to have a prompt answer to the preliminary issue I announced my decision the following day and said that I would give my reasons later. This judgment contains the reasons for my conclusion.

4

The Claimant was represented by Mr. Justin Mort QC, instructed by GBH Law Ltd, and the Defendant by Mr. Ian Ridd, instructed by Nockolds.

The course of dealing

5

The commercial relationship between the Claimant and the Defendant goes back to the mid-1990s, if not earlier. During that period the Claimant placed many orders with the Defendant for nitrile gaskets and other components. Orders were placed on almost a weekly basis.

6

The Claimant's method of placing orders did not always follow exactly the same pattern: sometimes orders were placed by fax, sometimes as ab .pdf attachment to an e-mail and, occasionally, by post. On some occasions the issue of the purchase order may have been preceded by a telephone conversation between the parties, but that was not always the case. I will assume, and the contrary has not been asserted, that over the 20 year course of dealing a significant number of purchase orders were sent by post.

7

The top copy of the Claimant's purchase orders was printed on white paper. On the reverse, printed in small type and light coloured lettering, were the Claimant's terms and conditions. I was shown an example of the top copy of a blank purchase order and it was not obvious on reading it that there was any printing on the reverse. Accordingly a person receiving the document would probably not know that there was any writing on its back unless he or she happened to turn it over or had been specifically referred to its existence.

8

This is relevant because there was no reference on the face of the purchase order itself to the existence of the terms and conditions on the reverse. However, in this case it was accepted on behalf of the Defendant that, by the time of the orders in question, its management was aware that there were terms and conditions on the reverse of the order forms.

9

However, when the Claimant placed an order by either fax or e-mail it did not transmit a copy of the conditions on the reverse of the purchase order. All that was sent was the front page of the purchase order so that the Defendant did not receive a copy of the terms and conditions on the back.

10

The Defendant responded to the receipt of the purchase order by sending an acknowledgement of order, which included the following wording at its foot:

"The quoted prices and deliveries are subject to our normal Terms and Conditions of Sale (copies available on request)"

11

When the goods were delivered they were accompanied by a delivery note. Printed on the delivery note was a standard form certificate of conformity. The Claimant contended that this was done to comply with a requirement on the face of the purchase order that "certificate of conformity required for all items". The certificate of conformity on the delivery notes was in the following terms:

"We hereby certify that the material detailed hereon has been inspected in accordance with the requirements of the conditions and requirements of the contract/purchase order, and unless stated otherwise conforms in all respects to the drawing(s)/specification(s) relevant thereto."

12

Mr. Mort submitted that this showed that the act of performance by the Defendant, namely the delivery, was not consistent with the order having been accepted on the basis of the Defendant's terms and conditions.

The authorities

13

In this section I consider a number of authorities on the incorporation of terms. However, I should make it clear that they were not all cited to me during argument.

14

In Hardwick Game Farm v SSAPA [1969] 2 AC 31 there was a series of oral contracts between SSAPA and its supplier, Grimsdale, for meal to be fed to game birds. Each contract was followed by a Contract (or Sold) Note sent by the sellers which contained on the back what were described as "Conditions of Sale". The buyer's agent knew that there were conditions on the back of the Contract Notes but had never read them.

15

There had been many previous dealings between the parties of a similar character. In each case the contract was followed by the dispatch of the Contract Note with the same standard terms on the reverse. In both the House of Lords and the Court of Appeal it was held that the conduct of SSAPA in accepting these Contract Notes without making any comment, query or objection about the Conditions of Sale was conduct which would lead Grimsdale, the seller, reasonably to believe that SSAPA intended to enter into the contracts on those terms. However, it is important to note that the transactions followed a consistent pattern with documentation in precisely the same form on each occasion.

16

In Circle Freight International Ltd v Medeast Gulf Exports Ltd [1988] 2 Lloyd's Rep 427, the course of dealing consisted of eleven contracts in the previous six months. On each occasion the contract had been made orally by telephone but the invoice for the carriage charges sent at a later date stated that all business was transacted by the carrier under the current conditions of the Institute of Freight Forwarders, a copy of which was available on request. A copy was never requested. The consignor's managing director accepted that he knew that carriers by road often dealt on standard terms which addressed questions of risk of loss or damage, but said that he had not noticed the reference to the IFF conditions in the invoices sent after each of the contracts had been concluded. The Court of Appeal held that the IFF conditions were incorporated into the contract.

17

At page 433, Taylor LJ noted that the consignor's managing director knew that some terms applied and that forwarding agents might impose terms which would frequently deal with risk, but never asked for a copy of the terms. In addition, he said that the terms were not particularly onerous or unusual. Taylor LJ then said this:

"… I consider that reasonable notice of the terms was given by the plaintiffs. Putting it another way, I consider that the defendant's conduct in continuing the course of business after at least 11 notices of the terms and omitting to request a sight of them would have led and did lead the plaintiffs reasonably to believe the defendants accepted their terms. In those circumstances it is irrelevant that in fact [the managing director] did not read the notices."

18

Bingham LJ (as he then was) said, at page 435, that the only possible answer to the question "Has reasonable notice of the terms been given?" was that it had.

19

Again, this appears to have been a case where the course of dealing consisted of a number of transactions carried out in precisely the same way.

20

The facts of Balmoral Group v Borealis (UK) [2006] EWHC 1900 (Comm) were a little more complicated. Between 1994 and mid-2002 Balmoral made nearly 400 purchases of polyethylene from one or more companies in the Borealis group. By a fax dated 18 January 1995 Borealis made it plain that its prices were quoted "… subject to normal terms and to current conditions of sale", and these terms were put on the back, or as one of the pages, of the invoices submitted by Borealis to Balmoral. These invoices was seen and initialled by Balmoral's managing director: he realised that there were terms on the back of the invoices but he did not study them.

21

From December 1995 Balmoral's purchase orders referred to Balmoral's terms, albeit in rather poor typescript at the bottom of the purchase orders, but these were never otherwise referred to or provided to Borealis. Christopher Clarke J (as he then was) found that there were no customary terms in the polymer trade in the UK in the sense of terms which are so "… certain, notorious and reasonable …" that anyone purchasing polymer must be taken to have contracted on those terms, unless...

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1 firm's commentaries
  • Battle Of The Forms In UK Supply Chains
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    • LexBlog United Kingdom
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